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How different are men and women when it comes to investing?

Posted October 1, 2018 by MoneyLink

There’s been a lot of research making its way around the internet recently, about how different men and women are in their approach to investing.

Recent research suggests that the psychological approach that men and women take is vastly different in two significant ways.

While previous studies have suggested that women tend to have a lower risk tolerance than men, that stereotype no longer appears to be the case, with new data suggesting that women may consider themselves risk-averse, but are actually less so when it comes to making decisions about their portfolios. So, it turns out women have a similar appetite for risk as men.

But, even though men and women will take similar ‘risks’, the big key differentiating factor according to the research, is that women will tend to take time to make decisions and they don’t react to volatile markets in the same way men do.

Women are generally less ‘competitive’ than men too, which means they’ll wait for an outcome, rather than rush one. The statistics – which are American based – showed that earlier in the year when the US markets lost 9 percent between Feb 2–8, the men panicked. In the study men were 87% more likely than women, on average, to sell an investment under those circumstances.

Emotional buying

Other information emerging also suggests something really interesting … and that is that women have a more ‘emotional-based’ approach to investing. It suggests that women tend to be very considered about the companies that they choose to invest in, selecting businesses where they believe they can make a difference – those that have a strong social purpose or environmental impact. That’s not to say that financial returns aren’t important, just that women tend to ‘hand pick’ companies based on a criteria that they can ‘feel good’ about.

And while research always tends to paint a generalised picture, it is great that more and more women are taking personal control of their finances and creating share portfolios.

The importance of investment for women

Women, on average, earn considerably less than men, and life style studies consistently show that their cost of living is often higher, that they will live longer and that they will often take large periods of time out of the workforce to care for children or relatives. All of these lifestyle factors have a significant impact on a woman’s earning power, saving power and superannuation. Investing is a great way to make your money work for you. Certainly, in Australia right now, most investments are making better returns than bank savings accounts. And you don’t need a lot of money to get started.

But no matter whether you’re male or female, it’s important to know the three keys to building a successful portfolio – these apply no matter what your gender!

1. Research and Logic

Know everything you can about the company you’re investing in, and then apply some logic and make a decision based on the facts in front of you. If you admire a company or feel strongly about its mission and vision, that’s great, but don’t decide solely on emotion.

2. Diversity.

Markets run in cycles and when some sectors perform well, others may be undergoing a ‘market correction’ or ‘slowdown’, so ensure your portfolio includes stock from a range of different industry sectors and countries. That way, you can minimise your risk.

3. Get professional advice.

A professional financial planner has access to moment-by-moment analysis and a wealth of other company / stock market information that helps him/her to inform decisions. A good planner will have an eye on your portfolio at all times and will be able to steer you through the ups and the downs, showing you how to navigate market trends to your benefit, and help you make astute investments based on your personal financial goals.

This is general advice and should not be treated as personal advice. Julie Nipperess is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.

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